Brand Services, L.L.C. v. Irex Corporation
Opinion
*154 The petition for rehearing is DENIED. The following is substituted in place of the prior opinion.
Appellant Brand Services, L.L.C. ("Brand Services") challenges the district court's grant of summary judgment in favor of Appellee Irex Corporation ("Irex") on Brand Services's Louisiana Uniform Trade Secrets Act ("LUTSA") claim and its civilian law conversion claim. Brand Services argues the district court erred by concluding that (1) Brand Services failed to produce sufficient evidence of damages and (2) LUTSA preempted its conversion claim. Brand Services also argues the district court improperly ruled on its claims without first considering Brand Services's pending discovery motion. For the reasons set forth below, we AFFIRM the district court's grant of summary judgment as to the civilian law conversion claim based upon trade secrets and REVERSE the remainder of the district court's judgment, remanding for further consideration in light of this opinion.
I. Factual and Procedural Background
Brand Services, an industrial scaffolding company, claims that its former employee, James Stanich, stole trade secrets and confidential and proprietary information when he went to work for Irex, a competitor. Specifically, Stanich allegedly transferred from his work computer files containing information about software that Brand Services uses to, inter alia, invoice customers and track job productivity. Stanich then purportedly used this information to help Irex develop similar software. Brand Services filed suit based on this alleged misappropriation, asserting claims under LUTSA and for conversion under Louisiana civilian law.
After Brand Services filed suit, the district court set the discovery deadline for February 17, 2017. Brand Services claims Irex filed improper blanket objections to Brand Services's first request for production, and thereafter repeatedly promised to produce responsive documents but had not done so by the discovery deadline. Brand Services moved to compel production of responsive documents on March 20, 2017. The magistrate judge denied the motion as untimely, but reminded Irex of its duty to supplement under Federal Rule of Civil Procedure 26(e). Irex never supplemented its responses.
The district court then granted summary judgment for Irex on Brand Services's LUTSA claim. The district court concluded that Brand Services failed to proffer evidence sufficient to create a fact issue on the amount of unjust-enrichment damages Irex obtained from allegedly using Brand Services's trade secrets. Brand Services moved for reconsideration of the ruling, and Irex moved for summary judgment on Brand Services's conversion claim.
While Irex's second motion for summary judgment and Brand Services's motion for reconsideration were pending, Brand Services discovered responsive documents produced in related proceedings in Pennsylvania. Although Brand Services moved to compel production of these documents in the Louisiana case, because the documents in the Pennsylvania case were provided under a protective order, Brand Services was unable to get representative documents in time to satisfy the magistrate judge in the Louisiana case, and the motion was denied. When Brand Services finally obtained the exemplar documents, it filed a motion for reconsideration. That motion remains unaddressed in the district court.
After Brand Services filed its motion for reconsideration of the discovery ruling, but *155 before the magistrate judge ruled on that motion, the district court granted summary judgment on Brand Services's conversion claim, holding LUTSA preempted that claim. The district court also denied Brand Services's motion for reconsideration of the LUTSA ruling, reiterating that Brand Services failed to submit specific evidence to establish its damages. In doing so, the district court did not discuss Brand Services's pending discovery motion. Brand Services timely appealed.
II. Jurisdiction
Although the parties do not contest jurisdiction on appeal, we must consider our jurisdiction sua sponte.
See
Ruhrgas AG v. Marathon Oil Co.
,
As far as the amount in controversy, the face of the complaint alleges facts showing it is more likely than not that more than $75,000 is at stake.
2
When a complaint alleges an unspecified amount of damages, the party invoking diversity jurisdiction must show by a preponderance of the evidence that the amount-in-controversy requirement is met.
See
St. Paul Reinsurance Co. v. Greenberg
,
Here, Brand Services pleaded damages exceeding the $75,000 floor. Brand Services alleged that it invested more than $300,000 in "[r]edevelopment" costs associated with the allegedly misappropriated software. For its LUTSA claim, Brand Services may recover what it would cost to acquire, lease, or develop misappropriated trade secrets.
See
Wellogix, Inc. v. Accenture, L.L.P.
,
III. Standard of Review
"We review a district court's grant of summary judgment
de novo,
applying
*156
the same standard of review as would the district court."
Reingold v. Swiftships, Inc.
,
IV. Discussion
Turning to the merits of the appeal, we begin with the discovery disagreement. Brand Services claims the district court prematurely granted summary judgment because Brand Services's discovery motion was never ruled upon. Brand Services argues that the district court should not have ruled on its LUTSA and conversion claims before considering the import of the documents from the Pennsylvania litigation.
A district court has discretion to deny as untimely a motion filed after the discovery deadline.
See
Vann v. Gilbert
,
Here, the district court failed to address the motion to reconsider the proffered exemplar documents that Brand Services alleges would show that Irex failed to properly respond to the discovery requests and to supplement as directed by the magistrate judge. Brand Services claims it moved to compel immediately after discovering the responsive documents in the Pennsylvania litigation. There is some indication that Brand Services could not have reasonably discovered these documents sooner: Irex's initial blanket objections to Brand Services's discovery request were grossly improper, and thereafter Irex did little to comply with Brand Services's requests. Therefore, Brand Services was arguably diligent in seeking these documents even though it did not discover them until after the discovery deadline had passed. At a minimum, Irex's conduct in this discovery proceeding is highly questionable and bears further examination in light of the exemplar documents. Thus, the district court improperly granted summary judgment without fully examining Brand Services's unaddressed discovery motion.
We further conclude that the district court erred in granting summary judgment on Brand Services's LUTSA claim because, even disregarding the Pennsylvania documents, Brand Services presented at least some evidence of the amount of its unjust-enrichment damages.
To recover damages under LUTSA, "a complainant must prove (a) the existence of a trade secret, (b) a misappropriation of the trade secret by another, and (c) the actual loss caused by the misappropriation."
Reingold
,
At summary judgment, "the nonmovant must identify specific evidence in the record ... sufficient to sustain a finding in favor of the nonmovant on all issues as to which the nonmovant would bear the burden of proof at trial."
Johnson v. Deep E. Tex. Reg'l Narcotics Trafficking Task Force
,
The district court determined that Brand Services failed to provide a just and reasonable inference of its damages. We disagree. Although Brand Services provided little in the way of detail about its claim that it spent "millions" to design the software allegedly stolen, it has, at a minimum, provided some evidence from which a factfinder could reasonably estimate unjust-enrichment damages. For example, it demonstrated that Irex's use of the allegedly stolen information saved Irex at least two to three days a month in time spent invoicing. Even assuming that Irex's administrative personnel worked only an eight-hour day for minimum wage during those two to three days saved, this is a reasonable inference of unjust-enrichment damages. Thus, we conclude that Brand Services met its summary-judgment burden regarding the amount of its damages. Accordingly, we REVERSE the district court's judgment on Brand Services's LUTSA claim.
We now turn to Brand Services's civilian law conversion claim. We ask only whether, in theory, there can be a civilian law conversion claim that survives LUTSA preemption. The district court went no further, so even if we determine that a theoretical claim could exist, we will not reach the question of whether the evidence supports such a claim here. We conclude that LUTSA preempts a civilian law claim for conversion of trade secrets, but does not preempt a civilian law conversion claim for confidential information that is not a trade secret.
Because the Louisiana Supreme Court has not decided this issue, we must make an "
Erie
3
guess" as to how it would do so.
In re Katrina Canal Breaches Litig.
,
LUTSA's preemption provision states:
A. This Chapter displaces conflicting tort, restitutionary, and other laws of this state pertaining to civil liability for misappropriation of a trade secret.
B. This Chapter does not affect:
(1) contractual or other civil liability or relief that is not based upon *158 misappropriation of a trade secret, or
(2) criminal liability for misappropriation of a trade secret.
LA. STAT. ANN. § 51:1437. Official commentary to the statute explains that LUTSA "applies to duties imposed by law in order to protect competitively significant secret information."
We also conclude that if confidential information that is not a trade secret is nonetheless stolen and used to the unjust benefit of the thief or detriment of the victim, then a cause of action remains under Louisiana law. LUTSA's uniformity provision instructs that LUTSA "shall be applied and construed to effectuate its general purpose to make uniform the law with respect to the subject of this Chapter among states enacting it." LA. STAT. ANN. § 51:1438. But courts interpreting their respective states' versions of the Uniform Trade Secret Act ("UTSA") have not uniformly applied UTSA's preemption provision; instead, courts have come to varying conclusions about the preemption provision's intended scope.
4
Thus, because there is not enough uniformity among states to predict how the Louisiana Supreme Court would decide the issue, we look to intermediate state court decisions.
See
In re Katrina
,
*159
The Louisiana appellate courts have twice held that LUTSA does not preempt where non-trade secret information was at issue.
5
See
B&G CraneServ., L.L.C. v. Duvic
,
V. Conclusion
For the foregoing reasons, we REVERSE the district court's judgment as to Brand Services's LUTSA claim and its civilian law claim for conversion of allegedly non-trade secret information and REMAND for further consideration in light of this opinion. We AFFIRM the summary judgment as to the civilian law claim for conversion of trade secret information.
In its complaint, Brand Services claimed it was diverse from Irex because Irex is a Pennsylvania corporation and it is a Delaware corporation with its principal place of business in Georgia. But a limited liability company's citizenship turns on the citizenship of its members.
See
Harvey v. Grey Wolf Drilling Co.
,
We reach this conclusion based upon the pleadings before examining the merits question of whether Brand Services has proffered sufficient evidence of damages to survive summary judgment.
Erie R.R. Co. v. Tompkins
,
See
Spitz v. Proven Winners N. Am., LLC
,
Both of these cases concern breach of fiduciary duty claims, an area specifically excepted from LUTSA's preemption provision. We see no reason, however, that Louisiana courts would think differently about a conversion claim.
Reference
- Full Case Name
- BRAND SERVICES, L.L.C., Plaintiff - Appellant v. IREX CORPORATION, Defendant - Appellee
- Cited By
- 54 cases
- Status
- Published